Renting of Immoovable property as Bungalow

[P S SATYA NARAYANA]

Dear Sir,

 

We are a Public Limited Company.  We have let out one of our Bungalows to another Corporate entitiy as Guest house and charge rent along with other maintenance charges (building maintenance) and Cook salary.  Does this attracts Service Tax.

[CASeetharaman KC]

Only renting of residential dwelling for use as residence is specifically included in the Negative list and hence excluded from the purview of service tax . All other rental receipts are taxable. Therefore rent receipts would be subject to service tax. Regarding maintainence services this is also a service provided and would be taxable if it is a lumpsum figure including labour and material. As you are saying that you are charging maintainence I would presume that you are billing lumpsum for material and labour.If the material for the repair is purchased by the tenant and your labour portion is billed separately by you then you need to charge service tax on the labour portion only. As far as cook's salary is concerned it would be supply of manpower for any purpose and would be subject to service tax but not under reverse charge mechanism as both service receiver and service provider are corporates. I suggest to be on the safer side and to avoid litigation it would be ideal to pay service tax on the whole amount and vail CENVAT credit if the service receiver is paying service tax on services rendered by them

[YAGAY andSUN]

Threshold limit will play an important role for determining the service tax liability.

[JAMES PG]

Cenvat credit eligibility for Guest House maintenance of a corporate is subject to the provisions of CCR

AI Summary

Service tax on commercial renting: guest house rentals and associated maintenance and manpower charges are taxable services. Service tax applies to letting of property used commercially as a guest house because the negative-list exclusion for renting applies only to residential dwellings used as residence; therefore rent receipts from letting to a corporate as a guest house are taxable. Maintenance charges billed as a lumpsum including materials and labour are taxable, whereas only the separately billed labour portion is taxable if materials are paid by the tenant. Supplying a cook is a taxable supply of manpower. Threshold limits affect liability and Cenvat credit eligibility is subject to the Cenvat Credit Rules.